Budget 2016: Hard-hit resource sector gets little relief

Federal budget extends mineral exploration tax credit for one year

A 30% to 40% fall in investment in oil and gas has taken a $30 billion bite out of Canada's GDP.

The 2016 federal budget will provide increased equilization payments for provinces hit by low oil prices and make it easier for laid off oil patch workers to collect unemployment benefits.

Otherwise, there appears to be little in the federal budget for the industries that created those jobs.

About the biggest item in the federal budget for B.C.’s resource sector is $50 million over two years to Natural Resources Canada (NRC) to invest in technology that reduces greenhouse gas emissions from the oil and gas sector.

It also includes $2 billion over two years, starting in 2017, for a new low carbon economy fund to help provinces and territories reduce greenhouse gas emissions.

As part of infrastructure spending, the government will provide $87.2 million to NRC for research projects in forestry, mining and minerals, earth sciences and mapping, and innovation in energy technology.

B.C.’s mining and exploration sector – hammered by a five-year bull market – won’t find much in the budget, except for a one-year extension to a 15% Mineral Exploration Tax Credit. The credit, which offers investors an incentive in the form of flow-through shares, was to end this month. It is being extended for one year.

“There’s not a lot of new initiatives for the business sector,” said Phil Ross, a tax partner with Grant Thornton.

“It does not look like there’s a lot in this budget for very specific industries. There are some green and there are some resource-targeted initiatives, but it seems to be very limited in scope.”

The budget includes $2.5 million over two years to “facilitate regional dialogues and studies that identify the most promising electricity infrastructure projects with the potential to achieve significant greenhouse gas reductions.”

Whether that might include a discussion between B.C. and Alberta to provide B.C. power to Alberta remains to be seen.

The federal government is grabbling with falling revenue from oil producing provinces. Citing Statistics Canada and Canadian Association of Petroleum Producers, it estimates oil and gas investment in Canada dropped 30% to 40% in 2015 – taking $30 billion bite out of Canada’s gross domestic product.

The government is budgeting for oil prices to remain in the $40 per barrel range throughout 2016.

nbennett@biv.com